By Ray Downs
By Lindsay Toler
By Danny Wicentowski
By Lindsay Toler
By RFT Staff
By Lindsay Toler
By Allison Babka
By Lindsay Toler
The audit team left Paris, and Sears claims that they weren't satisfied with what they had been shown. But they proceeded with unwinding the relationship.
Several months after the audit, inspectors were on hand to watch scrap dealers pick up the tooling and dies from the plant. Sears claims that, unlike the chaotic scene a few months before, the machinery was set out in an orderly arrangement. The tooling was set out in a grid, and each machine had spray paint marks of various colors. Sears claims this was no accident. Emerson, Sears claims, was marking the machines to indicate which items it wanted back.
State Line Metals, a Puryear, Tennessee, scrap dealer, was hired to disable the equipment for Sears. One of the conditions of State Line's contract was that it could not resell the machinery to Emerson. Sears claims that Emerson also knew of the stipulation.
But instead of trashing the tooling, Sears says, State Line sold it to Q.C. Recycling, a scrap-metal recycling center in Clarksville, Tennessee. Sears alleges that Q.C. Recycling never took the title to any of the machines, or even possessed the property. Instead, they were merely a straw party hired by Emerson and were responsible for returning the tooling. Then, Sears says, the "tooling designated by Emerson was returned directly to Emerson for its use in manufacturing product for a Sears competitor."
Sears also claims that Emerson got hold of a "unique" grinder. Weldon F. Stump and Company had been hired to resell it to anyone but Emerson, Sears alleges. So instead, Sears claims, Emerson hired a straw purchaser, DRF Montrex, out of Clarksville, to buy it. However, Sears alleges the coveted machine never left the building.
Sears claims that Emerson, in addition to retaining Sears-owned drawings and molds, defrauded Sears, induced others to defraud Sears, and violated the Trade Secrets Act.
Questions to Knight and Emerson officials were referred to spokesman Matt Wisla of the St. Louis public-relations agency Fleishman-Hillard.
"The allegations in this suit are completely false, and we flatly deny them," Wisla says.
In the court papers filed in response to the lawsuit, Emerson admits that it approached Sears and asked to buy some of the tooling and that Sears refused to sell it to them. It also states that it used the garment warehouse to store tooling equipment. Emerson says that it placed both obsolete equipment and Sears-owned equipment in the warehouse when it was replaced with new tooling for the Ridgid line.
Emerson admits that some of the Ridgid tool parts were based on designs used in Craftsman power tools but that those designs were Emerson's, not Sears'.
And Emerson even admits that it purchased Sears' tooling from Q.C. Recycling and DRF Montrex, including a grinder that never left the building. However, Emerson says that the salvage companies weren't barred from selling the tools back to Emerson nor was Emerson prevented from buying the equipment. Emerson also claims that it bought $7 million worth of machinery for the Ridgid deal and didn't use the Sears tooling and grinder for Home Depot until after it bought them from the salvage companies.
Emerson says that it told the Sears auditors that the decision to end the contract was "unpopular with the union workforce." And it says that although it arranged machinery for pick up and marked Sears' machinery, it says it doesn't know anything about an elaborate spray-painting code.
In short, Emerson alleges in the court papers that "it used its knowledge to stay in business" after Sears terminated it as a supplier. Emerson "denies it owes Sears anything."
Emerson, in a counterclaim filed on September 20 against Sears, alleges that the Chicago-based retailer still owes it about $1.5 million for tooling and machinery purchased while the two were still together.
This isn't the first time that Emerson's business practices have come under attack.
Back in 1990, Emerson faced criminal charges for defrauding the federal government on no-bid defense contracts. With a no-bid contract, Emerson was required to show the government its costs. Based on those numbers, the federal government and Emerson could negotiate a fair contract price. However, federal prosecutors claimed that Emerson was keeping two sets of cost numbers, an inflated one used to negotiate the contract price with the government and a true cost list that went to Emerson's accountants. Emerson vehemently denied the charges, then pleaded guilty to four counts of fraud and paid a $14 million fine.
Over a decade later, Emerson is once again facing accusations that it lied and cheated to buttress the bottom line.
In Paris, a place where everybody seems to know everyone else's business -- the local paper publishes school absences and motorists stop in the middle of the street to talk to each other -- few want to talk about the accusations being flung by two distant companies.
"That involves a corporate divorce, and that wouldn't be anything that I would be involved in at all," says Larry Crawford, part-time mayor and full-time cattleman.
Ditto for Whitlow, the economic-development official. "We have nothing to do with that. In fact, we couldn't even venture a comment on that."